Dear Fellow Shareholders,
On behalf of the Board of Directors (the "Board"), it is my pleasure to present to you our annual report for FY2017. 2017 was a pivotal year for Sunpower in which we saw the rapid expansion of our GI business. We rounded off the year with record-high revenue of approximately RMB2.0 billion, of which the GI segment contributed RMB152.2 million in Q42017. In addition, our EEM and EPC segments continued to gain momentum in FY2017 despite the downturn in the oil and gas industry in recent years. Riding on our brand reputation and competitive strengths, our order book went up for these two segments hitting a record high of approximately RMB1.9 billion.
In 2017, China's Gross Domestic Product expanded by 6.9%, exceeding the official target of 6.5%. Environmental protection remained a top priority on the Chinese government’s agenda with the release of a series of policies and laws that cover various pollution sources. In particular, China's 13th Five-Year Plan for National Eco-environmental Conservation, one of the key components of the national green development strategies, was issued in April 2017. These initiatives and the enforcement of the Environmental Protection Tax reiterate the Chinese Government's determination to tackle the pollution issue for the long run.
Rapid Expansion Of GI Business for Recurring Income
Backed by our cutting-edge proprietary technologies in environmental protection, energy saving and long distance steam distribution pipelines, Sunpower stepped up the pace of expansion in the GI segment in 2017 based on its robust project pipeline in order to build up a recurring income stream. As at 31 December 2017, a total of approximately RMB2.3 billion has been invested into our portfolio of GI projects, of which four projects have been in operation with average returns meeting the Group’s expectation. In addition, the Group also has other projects that are either under construction or in the design phase. These projects will begin to contribute recurring income once they commission in the near future.
The Chinese government's move to eliminate small "dirty" boilers and promote clean coal combustion has created opportunities for Sunpower, which has been strategically well positioned to harness them, with the adoption of its reliable and adaptable GI business model. The 20 to 30 years of exclusive concession agreement signed with the local governments will secure recurring demand for our GI plants in the region, ensuring our long-term success. The application of the circular economy model in certain projects not only reduces cost but also helps recycle wastes within the industrial park. Moreover, our GI business also creates a win-win situation for the local governments. Our GI projects provide local enterprises and residents easy access to clean and affordable energy, which helps the government attract more investments into the country. In return, the increase in investments will bring in more customers and drive demand growth for our products.
Top-Tier EEM and EPC Solution Provider with 20 years of strong track record
The revenue for our EEM segment in FY2017 reached a record RMB1.3 billion, representing an increase of over 30% year-on-year. As of 31 December 2017, the Group has delivered superior quality products and EPC services to approximately 1,500 customers in over 30 countries. Our repeat customers account for 70% of our EEM and EPC segments and these have become an important source of recurring income for the Group.
In 2017, we continued to execute our internationalisation strategy and successfully secured two EEM supply contracts worth a total of RMB150 million from a single customer in the United States of America. We also strengthened our market leader position in the solar industry after winning a total of RMB500 million worth of contracts from GCL-Poly and other polysilicon companies. In the EPC segment, Sunpower successfully expanded into the Flue Gas Desulphurisation market and enhanced its position as a leader in the flare gas recovery industry by securing a RMB107.0 million EPC contract. This flare gas recovery system is the largest on record in China's petrochemical industry.
Synergistic Business Model energises all of the Business Segments
After 20 years of growth, we have successfully evolved into an environmental protection solutions specialist with a proven synergistic business model. Our synergistic business model enables the Group to improve its overall performance and competitive edge, underscoring our integrated strength in acquiring and retaining customers as well as offering total solutions.
Strong Strategic Institutional Investors
Sunpower has brought in two strategic private equity investors, CDH1 and DCP2, as a result of the issue of US$110 million of convertible bonds in March 2017. CDH and DCP are among the leading private equity firms primarily focused on investments in greater China and are established by veterans with outstanding long-term track records in greater China. In addition to the convertible bond funding, we expect these investors to bring significant value-added support for our long-term growth.
Appreciation and Dividend
On behalf of the Board, I would like to thank our shareholders, customers and business partners for your continued trust and support for Sunpower. To show our appreciation to our loyal shareholders, the Board has proposed a first and final dividend of S$0.0012 per share for FY2017.
Looking ahead, Sunpower will continue to execute its existing strategy riding on the favourable industry trend and chart its course with the long term goal of "Becoming one of the most reputable and respected companies in the industry".
Guo Hong Xin
- CDH means CDH Fund v,L.P. and/or its affiliates
- DCP means DCP Capital Partners L.P. and/or its affiliates